BMI View: Coffee production in the Central America region will remain at risk over the next few years as the nature of subsistence farming will limit investment into safeguards against diseases such as coffee rust (roya). Countries in Central America are generally dependent on corn imports and we expect the corn production deficit to widen over our forecast period. Strength in the US dollar over this time frame will hurt the capital accounts of the region's countries. We believe the region's sugar industry will post strong growth over the coming years despite low international prices.
|Honduras Agribusiness To Outperform|
|Select Countries - Agribusiness Market Value (USDmn)|
|e/f= BMI estimate/forecast. Sources: FAO, BMI|
Coffee production growth 2013/14 to 2018/19: 38.3% to 15.8mn bags. We believe the coffee sector will continue to battle with disease and weather problems, though growth will be high over our period due to the base effects caused by these factors. We see more potential for the sector in the long term due to government support schemes.
Sugar product ion growth 2013/14 to 2018/19: 9.1% to 6.0 mn tonnes. Most countries in the region will continue to run a small production surplus out to 2018/19. Development of exports presents upside risks to our production forecasts over the long term.
2015 real GDP growth: 3.3% year-on-year (y-o-y). A moderate rise from 3.1% in 2014. Real GDP growth is predicted to average 3.4% between 2015 and 2019.
Consumer price inflation: 4.6% y-o-y in 2015. An increase from 4.1% in 2014. Inflation is predicted to average 4.6% between 2015 and 2019.
Although the worst effects of the roya disease are over for now, we believe that coffee output will likely remain volatile in the coming years, as roya will remain an issue in the region. We are more optimistic on production in the 2015/16, as the effects of roya have eased and regional prices remain elevated. However, export opportunities will be limited owing to the low price of coffee on the global market, caused in part by the strong depreciation in the Brazilian real.
Beef production growth will be flat in 2014/15 in Central America, despite lower feed costs year-on-year. This is predominantly due to our belief that pork and poultry will be in greater demand in the region. We forecast growth to accelerate out to 2018/19 as incomes and population numbers rise, expecting beef output to increase 6.6% on the 2013/14 level.
We expect imports of corn in 2015 to increase, especially as the global price of cereals is low by historic levels. We expect increasing exports to become a trend over the coming years and expect the region's self-sufficiency in its cereal requirements to decline. This said, we expect corn production to increase by 1.0% y-o-y in 2015/16, to 3.7mn tonnes, due largely to base effects.